Limited input VAT deduction excludes the application of the VAT exemption for TOGC

The Swedish Supreme Administrative Court upheld a decision regarding the VAT implications of Hedvig AB’s transfer of assets to its subsidiary, determining that the transfer does not qualify as a supply of goods or services under VAT law.
The case centered on whether the transfer of assets, including intangible assets and contracts, from Hedvig AB to Hedvig Försäkring AB should be exempt from VAT as a business transfer under Chapter 5, Section 38 of the VAT Act.
The court confirmed that the exemption does not apply because Hedvig Försäkring AB, which operates in a VAT-exempt insurance brokerage business, lacks the right to deduct or receive a refund for input VAT.
The ruling emphasized that applying VAT exemptions in such cases could lead to competitive distortions, as it would give an unfair advantage to businesses acquiring assets without incurring VAT costs.
The decision aligns with EU VAT Directive provisions, ensuring that the exemption is only applied when necessary to prevent market distortion and does not contravene EU law.

Reference to ECJ Cases

C-444/10, Schriever: This case is referenced to discuss the conditions under which a member state can limit the application of VAT exemptions.
C-497/01, Zita Modes: This case is also mentioned in relation to the requirements for member states when applying provisions regarding VAT exemptions.
C-651/11, X BV: This case is cited to explain the purpose of Article 19 of the VAT Directive, particularly regarding the treatment of VAT in business transfers and liquidity impacts on recipients.